CASH ACCOUNTS 1.0. These include online savings accounts, money-market accounts [MMA at banks], money-market funds [MMF; mutual funds], etc. The first 2 are FDIC insured & may pay higher interest rates as the banks can use those deposits for higher rate personal & business loans. Online savings accounts require links to your bank or credit union checking accounts & electronic money transfers between them via ACH may take 2-3 days. The MMFs can only invest in short term money market instruments & are therefore limited on what they can pay after expenses [watch their 7-day SEC yields]. Several MMFs ran into trouble during the financial crisis [2008-09] & MMFs have gone through reforms that have made their operations quite difficult & complex now. Although these reforms created 3 categories of MMFs, the government MMFs are the most relevant for individuals as these don’t impose redemption gates or fees; the other 2 types of MMFs [Prime, Institutional Prime] can do that on auto-triggers with short notices. If the #FederalReserve ever goes to negative fed fund rates, that would kill the US MMF business. A future post will discuss account protections. #PersonalFinance, 11/29/20 AM.
Last Edit: Aug 30, 2021 16:29:27 GMT -6 by Admin/YBB
CASH ACCOUNTS 1.1. Limited account PROTECTIONS exist in the form of FDIC insurance for bank deposits & NCUA insurance for credit union deposits; money-market accounts [MMAs] are included. There are tricks to enhance FDIC insurance at a single bank as accounts with different titles [individual, individual with POD/TOD beneficiaries, joint accounts, trusts, IRAs] have separate FDIC coverages. Of course, one can use different banks, but this can become unwieldy. There is a commercial CDARS program that automatically distributes large CD deposits among FDIC insured member banks. FDIC handling of failed banks has been very efficient – typically closed on Friday & reopen on Monday as a merged bank. Victims of fraud, identity theft or cyber-hacking are not covered by FDIC & banks require prompt reporting of issues to minimize or avoid losses. Banks are required to clearly distinguish between FDIC insured products & other non-FDIC insured investment products. Limited consumer protections also exist for NONCASH accounts such as SIPC insurance for brokerage accounts, state insurance for life insurance & annuities, but these workouts may take months or even years. #PersonalFinance , 12/11/20 AM.
Last Edit: Aug 30, 2021 16:18:49 GMT -6 by Admin/YBB
Retail corporate notes are offered by several companies. One gets these by signing up directly with a company program. Money transfer is through electronic ACH link to bank account or via wire transfer. These are not tradable securities. These are unsecured company IOUs, not insured (by FDIC or insurance companies or anybody else), but are like super "money-market funds"; an important difference of course is that money-market funds are regulated by the SEC. While some complications are involved for companies in dealing with retail customers, companies can get money at lower rates than the bond market, and retail customers can get higher rates than the money-market funds. Risks are that a company may go under, or unexpected program closure, or other program restrictions.